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March 17, 2016

On February 19, 2016, the USPTO Patent Trial and Appeal Board (PTAB) issued a final written decision in the Covered Business Method (CBM) patent review between Mitchell International, Inc. and Audatex North America, Inc. in which all challenged claims were found to be drawn to a patent ineligible abstract idea. While the CBM review had a predictable result of finding non-technical business method claims unpatentable, the claim construction analysis by the PTAB is troubling.

Mitchell filed a petition requesting a CBM review of claims 1-29 of U.S. Patent No. 7,912,740. The '740 patent issued on March 22, 2011 and relates generally to a method and system for entering data relating to an insurance claim for a damaged vehicle, and the data is processed into a valuation report that is transmitted through the world wide web. According to the background of the patent, when a vehicle is damaged, the owner of the vehicle may file a claim with an insurance carrier, and if the repair costs of the damaged vehicle exceed its value, or a certain percentage of its value, the vehicle may be considered "totaled". A problem with some existing systems is that the valuation does not account for specific variations of the vehicle, such as the condition of the vehicle or added aftermarket equipment. To obtain a more accurate valuation, an adjuster may access a more extensive database through the internet.

Claim 1, reproduced below, is illustrative of the claims at issue:

1. A method for obtaining an automobile insurance claim valuation report, comprising: transmitting a uniform resource locator over an electronic communication network from a client computer; connecting with a web site that corresponds to the uniform resource locator, the web site provides a plurality of web pages that allow an operator to input data relating to an insurance claim for a damaged vehicle; entering data relating to the insurance claim; processing the entered data to generate a valuation report for the damaged vehicle, the valuation report provides a market value for the damaged vehicle; and transmitting the valuation report to the client computer over the electronic communication network.

Standing and Claim Construction

The PTAB stated that the '740 patent is a covered business method patent because at least one claim of the '740 patent is directed to a covered business method. No analysis was given, but because the Patent Owner did not dispute such determination in the Patent Owner Response, the PTAB moved forward with the CBM review.

In a CBM patent review, claim terms are interpreted according to their broadest reasonable construction in light of the specification of the patent in which they appear. Under the broadest reasonable interpretation standard, and absent any special definitions, claim terms are given their ordinary and customary meaning as would be understood by one of ordinary skill in the art in the context of the entire disclosure.

The PTAB construed a number of claim terms. Of note was the construction of the terms "insurance claim" as encompassing, but not being limited to, "any data that would be used in making an insurance claim". A CBM may only be instituted when the underlying patent has been asserted, and here, the District Court in the co-pending litigation construed "insurance claim" in a different more limiting way, namely to be a "request to recover market value or repair cost in association with an insurance policy."

The District Court's construction was pointed out to the PTAB, but the PTAB ignored the District Court's construction. The PTAB stated that the Federal Circuit in Phillips v. AWH Corp., 415 F.3d 1303, 1315 (Fed. Cir. 2005) (en banc), requires that the claims "must be read in view of the specification, of which they are a part". Using the claim construction standards set forth in Phillips, the PTAB found that there is nothing in the specification of the '740 patent that would limit the claim term "insurance claim" in the more limiting way. Presumably, the District Court also used those same claim construction standards set forth in Phillips, and so it is troubling to see conflicting claim constructions used by the PTAB and District Court.

While the differing claim constructions between the PTAB and the District Court likely do not amount to much difference for patentability of the claims, seen below, it is a problem to have variation in claim construction performed parallel to each other.

Patentable Subject Matter Under 35 U.S.C § 101

Mitchell asserted that claims 1–29 of the '740 patent are not directed to patent-eligible subject matter under 35 U.S.C. § 101.

The PTAB followed the framework from the Alice decision for distinguishing patents that claim laws of nature, natural phenomena, and abstract ideas from those that claim patent-eligible applications of those concepts. First, it must be determined whether the claims at issue are directed to a patent-ineligible concept. Second, the elements of each claim must be considered both individually and as an ordered combination to determine whether the additional elements transform the nature of the claim into a patent-eligible application.

The PTAB disposed of the claims rather quickly under § 101. Each of the challenged claims was found to be directed to the fundamental concept of providing a vehicle valuation using information about the vehicle. The only technological features recited in the claims at issue are generic computer implementation systems performing generic computer functions. As acknowledged by Audatex's expert, the claims do not improve the function of the computer, they do not solve a problem unique to the internet, nor are they tied to a particular machine or apparatus.

Thus, the PTAB found that claims 1–29 are directed to patent-ineligible subject matter under 35 U.S.C. § 101.

Audatex's Motion to Amend

Audatex filed a contingent Motion to Amend to substitute new claims 30–58 for original claims 1–29, respectively. The PTAB denied this motion.

The ultimate burden of persuasion is with the Patent Owner, Audatex, to demonstrate the patentability of the amended claims, and because this burden was not met, the Motion to Amend was denied.

The new claims recited the same limitations of claims 1-29 and added the following underlined limitations of "the insurance claim being a request to recover market value or repair cost in association with an insurance policy", "providing a parts list and calculated estimate data through the web site", and "processing the entered data to generate a valuation report for the damaged vehicle, the valuation report provides a market value for the damaged vehicle, before the damaged vehicle was damaged, based on factors including mileage, condition, and geographic location."

The PTAB found that Audatex did not establish that the amended claims are patentable under 35 U.S.C. § 101. Audatex argued that the amended claims recite a system and method that solves a technical problem, and that the amended claims do not preempt all means for obtaining a valuation report. But, the PTAB found that the claims still are drawn to the abstract idea of providing a vehicle valuation report, and recite no more than a generic computer for doing so. The § 101 analysis remained the same.

The PTAB also found that Audatex did not establish that the claims are patentable over the prior art. Not discussed here, but the PTAB found claims 1-29 were unpatentable under § 101 and also anticipated by a prior art reference to Reimel. The PTAB found that, it would have been well within the level of skill of the ordinary artisan to use the vehicle valuation system of Reimel to provide a parts list and calculate estimate data, as well as leave out the damage caused by an accident to obtain a pre-damage valuation for the vehicle, as recited in the amended claims.

Thus, because Audatex did not meet its burden of demonstrating the patentability of the proposed substitute claims, and the Motion to Amend was denied. As a result, the '740 patent was left with invalid claims.

Comments

Hi Joe:

You wrote "...it is troubling to see conflicting claim constructions used by the PTAB and District Court."

Query...

Right or wrong, at present, isn't it proper that the PTAB and the District Court would arrive at different claim constructions due to the differing standards (i.e., the PTAB using BRI and the District Court using P&OM)?

From my European standpoint I find it very hard to get excited about the level of invention in the subject matter of claim 1.

Although an International application was filed, it was not brought into effect at the EPO, which appears to have been a wise decision. As a rough working rule of thumb, I suggest, cases which cannot be successfully prosecuted through the EPO should not be litigated in the US. Much anguish in the Alice case could have been avoided if this rule of thumb had been followed.

For all the Cuozzo [and amicus support] allegations of a big difference between BRI and Phillips claim construction which would make a big difference in IPR outcomes,* they have yet to provide support for that argument from actual cases that contain more than dicta irrelevant to the final result, as here. [Also, a mere D.C. claim construction, as here, is not even binding on another D.C.]

*That is unfortunate wistful thinking, because the real difference is from the claims vs. the prior art being compared by three patent attorney APJs rather than a lay jury.

The difference in construction suggest to me that the term is indefinite.

I don't even know which art one has to be skilled into to know exactly what an "insurance claim' may be; the computer arts? The insurance arts? A claim may be a final agreement between an insurer and an insured to cover an indemnity, or it may be an assertion by an insured, or an assertion by a non-insured third party, or a hypothetical construct used to negotiate the possibility of an indemnity being paid...but the real point is that in a common sense world, how does an insurance claim relate to the patent system in the first place?

Mr. Snyder, is your question one of utility? Are you sliding into a view of "technology" when you should be aware that the U.S. patent system is not one of "technological arts" but rather one of the broader "Useful Arts"....? If you are going to call upon "common sense," it would be helpful to recognize the critical difference between "technological arts" and "Useful Arts" in order to properly inform that sense. I am aware that you have been teaching yourself with articles that have not made that distinction a part of the "common understanding" and I would urge caution there.

Mr. Cole, along this line of thought I would reject your call for applying EP law to a US law question as you have glossed over the differences in sovereign law without (apparently) a second thought as to those differences even existing.

The truth of the matter is that we do NOT have a "one world order" and that patent law REMAINS at its heart (even with treaties and such seeking to make a more aligned processing of patent law) a Sovereign-specific and inward looking law. I would also reject the unstated assumption that harmonization FOR ITS OWN SAKE is always something good and desirable. It is not xenophobic or overly nationalistic to be more concerned with a national view of building innovation strength within the US, as opposed to making it "easier" for non-US (and truthfully non-ANY country) transnational corporations to be able to have a "world" patent.

Separately, and to all readers, the notion that what is topically called the "Fourth Branch of the U.S. government" (the administrative agency branch) collecting unto itself the unbridled and unchecked powers from each of the three traditional branches (for which the United States government was explicitly built to have cross branch checks and balances) yields one of the WORST FEARS of consolidated power that our Founding Fathers had.

A PTAB that decides for itself what the law means (interpretations) in essence adopts the worst of the judicial branch tendency to use "common law" law writing in an area explicitly off-limits to that type of law writing (the judicial branch violating the legislative branch powers).

Follow along the admittedly complicated path here: so we have an executive branch agency, with a pseudo-judicial branch power, directly under the control of an executive with the worst record ever on transparency and whom it is (properly) delegated pursuit of policy objectives unchecked by any other branch basically "making things up as they want to see things."

From a power-checking and balance point of view, does anyone else see the issue here (within the US sovereign)?

While not directly geared to patents and patent law, it is emblematic of the disregard for "transparency in particular - ironically a plank of the Obama election campaign - and more generally, the disregard for the rule of law (if we want a direct example, one can easily turn to the Ron Katznelson "Tr011-busting" IQA request, fast approaching its YEAR anniversary).

In a times where SAWS evaporates under just a tiny bit of public sunshine (but not before the Office reveals that SAWS was but one of many such programs), and in a time where the Director is having closed door, minute-LESS meetings with major "donors" and others attempting to affect both policy and enforcement of existing law, this growing list of aggrandized power moves and disregard for any other branch of the government (or of the citizens) SHOULD BE alarming.